X=2

Fx, Inc. is a volume manufacturer of high technology automotive mirrors (including cell and voice activation). FX is looking to expand their operations to add a second product line capable of producing 1.3 Million units per year. The equipment investment cost for this new operation is $23 Million. The project falls under a 7-year MACRS class life, and the company estimates that the salvage value will be $2.7 Million at the end of the 6-year project. The average selling price for each mirror is $8X per unit (X- the last number in the AU ID of one of the students, e.g., ID-903951990, then the selling price is $80) The annual expected sales are shown below: 2020 450,000 2021 550,000 2023 Year Volume 2024 1,000,000 2019 2022 750,000 300,000 900,000 The material cost for each mirror is $20. The labor cost to produce each mirror is $13 with the additional carriable cost of manufacturing at $15 per unit. The fixed cost of manufacturing operations is $10 Million per year. Assume that FX has a tax rate of 25%. Also, assume that FX uses a MARR of 1x% for all economic analysis. (X- the last number in the AU ID of the other student) a) What is the NPV of the investment? Do you accept this project? b) If the company could borrow $15 Million of the initial investment at 10% that will be paid in six installments, how would this change the NPV calculation? Do you recommend getting the loan? Perform sensitive analysis on +/-20% changes in volume, initial investment, unit variable cost, and salvage value from part b. Graph your data. Identify the key variables c)